Aramco to buy stake in JV Petro Rabigh from Sumitomo Chem (updated)

SUMITOMO CHEMICAL

07/08/2024 08:05

* 
      Aramco to boost stake to 60%, Sumitomo down to 15%
    

        * 
      Petro Rabigh accumulates $2.36 bln losses to end-June
    

        * 
      Parent firms to support JV's turnaround including funding
    

  
 (Updates with details on Petro Rabigh's losses, turnaround in
paragraphs 3-7)
    By Yuka Obayashi and Yousef Saba
       TOKYO/DUBAI, Aug 7 (Reuters) - Saudi Aramco  2223.SE 
will buy from Japan's Sumitomo Chemical  4005.T  a 22.5% stake
in their petrochemical joint venture Petro Rabigh for $702
million, the companies said on Wednesday, outlining a turnaround
strategy for the loss-making firm.
    Under the deal, Aramco and Sumitomo Chemical will each
provide $702 million in funding to Petro Rabigh  2380.SE  and
waive loans worth a total $1.5 billion, the statement said.
    Petro Rabigh had accumulated losses totalling 8.871 billion
riyals ($2.36 billion) by the end of June, which was equivalent
to over 53% of its share capital, it said on Wednesday.
    The Aramco-Sumitomo deal explores a remedial plan as Petro
Rabigh looks to abide by Saudi law, which says that if a
joint-stock company's losses are half its issued capital, it
must announce them and make recommendations within 60 days. 
    An extraordinary general assembly meeting must also be
called within 180 days to either take steps to resolve the
losses or dissolve the company.
    Petro Rabigh's board was notified of the accumulated losses
on Tuesday, it said in a filing on its second-quarter results.
    The losses were mainly due to "unfavorable market conditions
which resulted in lower or negative margins of the refined and
petrochemical products" and higher finance costs due to an
increase in interest rates, the company said.
    The deal shrinks Sumitomo Chemical's stake in the joint
venture to 15% while increasing Aramco's share to 60%.
    The sale aligns with Aramco's downstream expansion and
Sumitomo Chemical's move away from commodity chemicals toward
speciality chemicals, they added.
    Sumitomo Chemical plans to book a pre-tax loss of 27 billion
yen ($183 million) in the July-September quarter as a result of
the deal, the company said in a separate statement, adding that
it is sticking to its annual profit forecast it announced in
April.
    
    ($1 = 147.5000 yen)
    ($1 = 3.7545 riyals)

 (Reporting by Yuka Obayashi in Tokyo and Yousef Saba in Dubai;
editing by Miral Fahmy)
 ((Yuka.Obayashi@thomsonreuters.com; +813-4520-1265;))